Oil Insights with Harry Tchilinguirian | S1 E3

World of Oil Derivatives

Welcome to the third episode of Oil Insights, hosted by Harry Tchilinguirian, Head of Research at Onyx, alongside co-hosts Mita Chaturvedi and Martha Dowding.

Despite the vanishing trading volumes amid the holiday in the UK, it has been anything but a quiet beginning to this week, with the front month Brent futures contract firming to an intraday high of $81.50 on Monday. Tensions in the Middle East, dovish remarks by Fed Chair Jerome Powell, and tensions surrounding Libya's crude oil production have all engulfed the oil market.

Dated Brent also found strength, with the front-month DFL rallying to $1.40/bbl. However, CFTC data for the week ending 20 Aug showed money managers remaining bearish. Coupling this with Onyx's CTA positions trending towards max net short, this prompted the question: Are the bears still lurking despite this newfound bullishness? The price action on Brent futures on Tuesday would tend to suggest so, with the soon-to-expire front-month October contract down by over 2% by 6 pm BST.

The bullish sentiment was also seen in fuel oil. Singapore VLSFO cracks have seen remarkable performance, driven by factors such as increased bunker fuel demand, buying in the physical window, and depleting inventories. However, as open interest continues to skyrocket, one questions whether saturation has hit too close to the sun.

Going forward, we'll keep our eye on the upcoming October Brent futures expiry. The Oct'24 and Nov'24 futures flat price contracts are currently around $1 within each other, and whether the expiry causes a roll up or a roll down in the new prompt will be one to watch. Finally, to add to the uncertainty, OPEC+ has been....quiet lately. Are we currently in the calm before an OPEC-news driven storm?

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